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July 25, 2013

RiverNorth’s Schmucker: ‘Lots of Opportunity in Fixed Income’

Is the CEO of the Chicago-based closed-end shop crazy? Like a fox, if recent moves are any indication

Brian Schmucker at Schwab Impact last fall.

How do you amass $2 billion in assets under management without the benefit of a wholesaling staff?

Simple—partner with the industry’s A-listers. Or more specifically, offer unique strategies with those A-listers, explains Brian Schmucker, CEO of RiverNorth Capital.

“We have relationships with Jeff Gundlach and DoubleLine Capital for our strategic income fund, Manning & Napier for our dividend income fund and now we’ve partnered with Oaktree Capital for our high income fund,” Schmucker proudly states. “Howard Marks, chairman of Oaktree, is a legend on the institutional side, especially in credit, but not all that well known on the retail side.”

That’s something Schmucker hopes will change with the new relationship, which is part of an overall strategy to broaden the firm’s traditional closed-end fund offerings.

“We went outside and recently brought in a team that knows options really well,” he says. “As far as fixed income, volatility is back. People have been busy chasing yield. Now retail investors are getting out of fixed income.”

Said volatility is magnified in the closed-end space. Schmucker notes they were once trading at a premium, but have now “blown out their discount.” He isn’t concerned, adding “we are on the other side of those trades.”

“When markets are fat and happy, there isn’t much opportunity in the closed-end space. Now, because of the volatility, we see great opportunity, specifically in fixed income.

It’s that kind of confidence, buying when everyone is selling, selling when everyone is buying, that caught the attention of the aforementioned partners.

Oaktree, DoubleLine; they said ‘we get what you’re doing,’” Shmucker concludes. “It’s validation.”

The RiverNorth/Oaktree High Income Fund focuses on total return consisting of long-term capital appreciation and income. The Fund is designed to capitalize on market inefficiencies in both closed-end funds and the credit markets.

The Fund provides daily liquidity and allocates its assets among three strategies: a closed-end fund strategy (managed by RiverNorth), a senior loan strategy and a high yield bond strategy (both managed by Oaktree). Combined into a single fund, the three strategies are meant to work together to offer investors the potential for attractive yield.

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